Since Newfoundland joined Canada on 31 March 1949, its relationship with the rest of the country has been governed by the Terms of Union. The document defined the powers and obligations that the provincial and federal governments would assume upon union, and guaranteed that the Canadian constitution would apply to Newfoundland as it did to the other provinces. It also set forth various provisions unique to Newfoundland - its borders, electoral boundaries, denominational education system, and certain financial arrangements, for example.

Negotiations

The Terms of Union were the result of talks and negotiations which took place in 1947 and 1948. The first round took place in the summer of 1947, when a delegation sent by the National Convention to Ottawa negotiated draft terms of union with the federal government. The talks began on June 24, and lasted three months. The delegation returned to St. John's on 30 September and the draft terms were tabled in the Convention on 6 November.

The draft terms envisaged that Canada would assume responsibility for 90 per cent of Newfoundland's debt, leaving the new province liable for about $10.5 million, and largely in control of its $28.8-million surplus. Canada would pay Newfoundland statutory subsidies (federal transfer payments made to all provinces) as well as special transitional grants totalling $26.25 million over a 12-year period, during which time the province would implement a system of provincial taxes. Canada also agreed to appoint a royal commission to review Newfoundland's financial position within eight years of confederation. Family allowances, old age pensions, unemployment insurance, and other federally administered social programmes would be extended to Newfoundland.

The draft terms granted Ottawa control over various services and departments that typically fell under federal jurisdiction. These included defence, civil aviation, the Newfoundland Railway and its associated marine services, public broadcasting, postal services, and public harbours and wharves. The fisheries also fell under federal control. The terms guaranteed continued employment for Newfoundland's public servants and allotted the province six senators and seven members of the House of Commons. Newfoundland's denominational education system would be preserved after confederation, and so would the right to manufacture margarine, an important staple in Newfoundland households. (At the time, Canada had banned margarine to protect its large dairy industry.) Newfoundland's existing laws, courts, and legal commissions would remain in effect upon union and the new province would retain control of its land-based natural resources.

The draft terms were central to the confederate campaign in the referendums of June and July 1948. Once the public voted to join Canada, the final Terms of Union had to be negotiated. The Commission of Government appointed a delegation to go to Ottawa, consisting of F. Gordon Bradley, Chesley A. Crosbie, Phillip Grouchy, John B. McEvoy, Joseph R. Smallwood, Albert J. Walsh (chairman), and Gordon A. Winter. The delegation spent much of the fall of 1948 negotiating with officials from the Canadian government. The draft terms formed the basis of the new talks and many of their basic principles remained. However, there were some changes, mostly regarding financial arrangements and the fisheries.

Newfoundland's precarious financial position, while improved by the Second World War, would still require a large amount of investment from the Canadian government to bring its social services and infrastructure in line with the three Maritime provinces (which were to be used as the yardstick. As a result, Canada increased Newfoundland's 12-year transitional grants from $26.25 million to $42.75 million (Term 28).

Although the draft terms granted the federal government control over the "[p]rotection and encouragement of fisheries" (draft term 5, no. 8), the official terms provided for a five-year transitional period. The Newfoundland Fisheries Board would continue to administer the fisheries until 1954, when the federal Department of Fisheries would take over (Term 22).

The Terms of Union Adopted

The official Terms of Union were signed by the representatives of Canada and Newfoundland on 11 December 1948. Prime Minister Louis St. Laurent and Brooke Claxton, vice-chairman of the Cabinet Committee on Newfoundland, signed for Canada, while all the members of the Newfoundland delegation signed on behalf of Newfoundland, with the exception of Crosbie, who was dissatisfied with the financial arrangements.

The Commission of Government approved the Terms on 26 January 1949, followed by the Canadian government on 16 February. It was also necessary for the British government to ratify the agreement and amend the British North America Act. The British Parliament passed the necessary legislation on 23 March, and the Terms of Union came into effect "immediately before the expiration of the thirty-first day of March 1949" (Term 50).

The Terms of Union dealt with: the province's name and boundaries (1-2); governance under the British North America Act (3); representation in parliament (4-6); constitution and legislature (7-16); education system (17); the continuation of existing laws (18-21); fisheries (22); financial terms (23-29); the transfer of certain services, resources, and departments to federal control (30-45); the continued manufacture and sale of margarine (46); income taxes (47); the Statute of Westminster (48); the preservation of existing labour agreements (49); and the implementation of the Terms of Union (50).

Many of the Terms of Union are relatively straightforward and operate without much controversy. But some have created challenges. For example, disputes have sometimes erupted between the provincial and federal governments over resource rights and financial arrangements. Term 17 was also central to a heated debate in the 1990s, as the Newfoundland public decided whether to end denominational education. Although the Terms of Union remain the legal implements that govern the province's relationship with Canada, they are not so rigid that they cannot be altered if a strong case is made, and if the other provinces do not object. This has happened twice: first in 1998 to change Term 17, and then in 2001 to officially rename the province Newfoundland and Labrador (Term 1).